In the mid-1950s The Hartford (Conn.) Courantt featured a photo, page one, top of the fold, of a new six-story high-rise public housing unit. The building was L shaped. The camera focused on where the sections came together. The point of the photo was an ugly pile of trash nearly three stories high.
There was a hue and cry: "How could the residents be so irresponsible, creating such a hazard? The residents demonstrated contempt for the tax payers' investment for improved housing. Shouldn't those people know better?"
The public and city officials tried to understand the outrageous behavior. Anger was substantial. The surviving reasons were that the residents came from unsafe, poorly constructed, one-story houses - the commendable (?) motivation in the first place for new public housing). The residents had no experience with trash chutes nor the social disciplines required for high-rise living. Experienced supervision was found not to be available to advise and encourage appropriate behavior. The residents, additionally, were upset about having to move. An experienced apartment manager with people skills was eventually provided.
The recent financial crisis started with failing sub-prime loans. Sub-prime loans were designed to make it easier for families with limited means to buy a house and be among those who could enjoy an aspect of the American dream - home ownership. Any loan has risk associated with it. The success of the loan is significantly related to reliability, income prospects, education and knowledge of the one who borrows
In a free society, who is to say where the judgments are to be made about taking risk? One might think experienced bankers are most likely to know which loans will probably succeed. If the borrower hasn't sufficient discipline to save 20 percent or so for a down payment before inking the papers, reliable future payments might seem doubtful for a prospect with low income and limited chances for advancement. Most troubled loan instruments were not made by local professional bankers we have trusted and depended on for years.
A man I know who is comfortable, but probably not wealthy, was asked while in the process of purchasing a home years ago, "Who will your mortgage be with?" He replied, "I will pay cash." Some put nothing down. Some put something down. And some put it all down. How much risk people want to take is an individual, educated choice. Which one is most likely to be secure in a time of economic crisis? In a vigorous, consumer-driven economy, that is difficult to know.
The first scenario concerns people who have limited income. The second concerns people with income which seems adequate, if the larger economy behaves itself, producing reliable jobs and income. The economy failed when some Wall Street firms employed untrackable and unconscionable investment schemes.
A third group of people of interest is wealthy, represented by some key AIG personnel, as reported in the press. They pocketed multimillion dollar retention bonuses to stay in employment with a firm that was not viable and sustained only by huge amounts of federal money. A wrinkle was the bonus recipients had contracts that assured the bonuses, notwithstanding the fact that the corporation had no earned money to pay. Because of custom and law, such situations exist. It appears there was little initial sense of misgiving or empathy on the part of the corporation or on the part of the bonus recipients. "I got mine," was all that counted. Some changes were made later.
Consequences vary for citizens and especially for those who have less capacity to protect themselves. Respect for decency and responsibility for what is right are elusive in this complicated world. It is curious, however, what it takes to motivate some otherwise honorable people to do the right thing. Better external financial overview is needed. Even in a free and democratic nation, every corporate entity, private or public, needs better independent financial examiners and legal advisers. The lack of social responsibility of many of the brightest and best has wrought damage on the ordinary guy and gal who counted on them to lead and advise. It must not happen again. The waste has been too great, too exploitive, too un-American.